Most South Florida homeowners covered by the state-run insurance company will see a 10 percent increase in their premiums next year, but a lucky few could wind up with rate cuts.
Most homeowners in South Florida covered by the state-run insurance company will see a 10 percent hike on their policy premiums next year, its board of governors affirmed Wednesday.
And the increases won’t stop there.
Over the next five years, Citizens Property Insurance will continue to raise rates. By the end of the period, a homeowner’s premium will be more than double the price today.
But a fortunate few — including condo unit owners and renters in some sections of Miami-Dade and Broward counties as well as a handful of Key West homeowners — could see decreases of as much as 10 percent.
The rates changes will kick in after Jan. 1 as policies come up for renewal. The goal of the rate increase is to make sure that Citizens, the largest insurer of homes and condos in Florida, accumulates sufficient dollars to cover the bulk of the claims it could face if a massive storm hit a section of the state. About half of Citizens’ 1.1 million policies cover South Florida properties. For homeowners in coastal sections of the state, Citizens is the only option for insurance including windstorm coverage.
The immediate pain could have been worse if Citizens had been allowed to increase its rates in one year after a three-year rate freeze that ends this year.
For instance, Broward increases could have ranged from 23 percent to more than 36 percent. Citizens policyholders in areas of Miami-Dade outside of Hialeah, Miami Beach, and the city of Miami could have been hit with a whopping increase of more than 100 percent.
At a meeting Wednesday, Citizens’ board of governors agreed to go with the 10-percent increase as required by a new insurance bill passed in May by the state Legislature.
Citizens’ board is required to approve rate filings before they are submitted to Florida regulators, who have the final approval.
Lawmakers instituted the 10 percent cap to soften the financial impact on Citizens policyholders after rates had been frozen since 2007. But even with the rate cap, most Citizens policyholders will see substantially higher premiums.
“In less than five years, rates would more than double” because those 10 percent increases are compounded, said Heather Carruthers, president of Fair Rates In Monroe, a consumer advocacy groups based in the Keys.
“That’s why the rate cap was so important to lawmakers,” said Christine Turner, Citizens’ director of government relations.
Citizens’ board found itself in a quandary at Wednesday’s meeting because a preliminary staff analysis showed that some policyholders, especially in inland regions of the state, have been paying higher rates than justified by hurricane risk.
The board generally was surprised by data supporting rate decrease for some policyholders. However, some board members argued it would be fiscally irresponsible to allow rate cuts when Citizens overall rates have been suppressed for nearly three years.
Steve Parton, general counsel for the Office of Insurance Regulation which would ultimately approved any Citizens rate change, argued that there’s no legal basis for Citizens’ not to pass on the rate decreases where they’re indicated. The language in the law doesn’t mention potential rate decreases. It just addresses the rate cap on increases. “If we’re going to phase in [rate changes] on the high side, then we need to phase them in on the low side,” said Christine Turner, Citizens’ director of government relations.
Lisa Miller, former deputy insurance commissioner and now a consultant to several insurance companies said, “There are two distinct arguments in this rate debate: one is that when an actuary does the math indicating rate increases, there will be corresponding decreases. The other argument is a policy issue: the financial soundness of Citizens or the lack of it should be the guide.”